Capitalism must change to avert climate change, according to the vice-chair of the world’s largest asset manager, Blackrock.

Two weeks ago, Blackrock boss Larry Fink shook the corporate world with a letter demanding social responsibility in return for the support of his company, which manages around $6 trillion in assets.

On Wednesday at the annual World Economic Forum in Davos, Philipp Hildebrand expanded on that theme in a discussion of “fiduciary duty” – the responsibility to make clients the best return on their investments.

The concept was “evolving” to show failure to factor in environmental, social and governance factors would be a breach, he said, calling on academics to look more deeply at the issue. The European Commission recently launched a public consultation calling for contributions from the financial world.

“We will hopefully demonstrate that at a minimum there is not a negative trade-off and there may even be better performance,” said Hildebrand.

That would mean funds like Blackrock could become duty-bound to consider environmental risks such as climate change while making investments. It would create a dramatic shift, he said, but warned it would take time.

“We have to be realistic, we also have an enterprise to run, we have shareholders, this is a complicated story. Nobody is served by reducing this to very simple, fast things that we have to do immediately.

We have to change capitalism. This is really what’s at stake here. And frankly we need a new contract between companies, investors and governments,” said Hildebrand.

Former US president Al Gore, who was on the panel with the Blackrock executive, agreed that the field of research was still evolving.

But he said: “In 26 sectors of the economy, the vast majority of them, the companies that integrate ESG (environmental, social and governance) into their business plans perform better.”

He added: “For many years investors and asset managers have said ‘well I would like to invest with attention to these things, but my fiduciary duty to my clients keeps me from doing it’.

The revolutionary change… is that now it may be becoming clear that if you do not integrate these factors into your investing, you’re violating your fiduciary responsibilities.”

Blackrock’s activist rhetoric on climate change and sustainability is not new. In 2016, Fink called on companies to consider climate risk.

Last year, Blackrock hired Brian Deese, a former senior advisor to president Barack Obama, to head up its $195 billion Sustainable Investing group. Deese was a key advisor to the president on climate and part of the US team that negotiated the Paris climate accord.

Critics note that most of Blackrock’s money is in passive funds, limiting its ability to shape the market by divesting from unsustainable businesses.

The investor has other ways of exerting pressure, though. Last year it backed a shareholder resolution forcing oil giant Exxon Mobil to report on its exposure to climate risks. As a shareholder, it can also vote for board members.

40 Comments

If you want to change capitalism, you need to be an active investor – or give your funds over to an “ethical” manager.

(Many of the so called “ethical” platforms still invest in oil and gas exploration and production. Go figure.)

Ren Stimpy 1 year ago

Changing capitalism is to change the individual’s ability to work hard to earn suitable money in a cumulative individual effort to benefit their family’s well-being and their children’s futures.

It. Is. NOT. Going. To. Happen.

Capitalism is here to stay.

So climate change abatement needs to work within the framework of capitalism. In fact it needs to harness and effectively use the multipliers of capitalism, such as price reductions of renewable energy per unit of output ,and cheaper battery storage. ‘Play’ within the system you have been dealt with, and you will inevitably/eventually win. We simply won’t go full lefty/greeny because if we do we will certainly fail within this non-negotiable framework.

Keith Altmann 1 year ago

Keith Altmann.

Ren Stimpy presents a simple individual response about the future of capitalism. Capitalism as we know it now is not here to stay – it will require major surgery if it is not going to destroy the future of coming generations. Capitalism needs to work within the framework of the capacity of the planet’s natural systems to support life on Earth and the current capitalist model as framed is not doing that. It is exceeding the regenerative capacity of the planet to sustain most life forms on the planet by the end of this century. The planetary system has no regard to an individual’s desires. Ultimately, unless we accept that current world demands and expectations are not sustainable without major changes to the dominant economic model and lifestyles, preferably in a planned transition, we will soon hit the limits of growth. We may well deal with some aspects of climate change through technological improvements but that will alone not be adequate.

Unfortunately, continuing to play within the current system will no longer result in a win for the whole community as our economic models ignore science and that will bring the current system undone.

Brush up on the laws of science, especially entropy, and forget labels such as lefty/greeny – labels are not a solution to a system of growth that is not sustainable on a finite planet.

Ren Stimpy 1 year ago

The planet’s arse! Don’t you know that I am far more important than you AND the planet.

Ren Stimpy 1 year ago

How have the lefty/greenies helped to moderate that point of view. Did they venture out from their extreme judgmental position to help solve the crisis?

John Saint-Smith 1 year ago

I’m beginning to think you mean it. Pest with a cartoon name.

Kate 1 year ago

He does seem like a clear troll.

Wish they would stop wasting everyone’s time.

Ren Stimpy 1 year ago

Things justa Don’t seema To be going right

Andy Saunders 1 year ago

I don’t know what he’s written elsewhere, but his points are valid, at least to discuss.

I’m not sure what Blackrock was saying, but I suspect it is a plea for some form of sensible carbon/GHG pricing. If so, far, far better to have individual incentives working within a capitalistic system – that’s been shown to work well, with the alternative (central regulation) being shown in several cases not to work well. As Paul Keating sorta once said – pick the horse call self-interest, at least you know it’s trying.

Ren Stimpy 1 year ago

It gets me hopping mad. Is that enough?

Ren Stimpy 1 year ago

It’s a genuine and strongly held opinion (being that generally speaking human beings will choose self interest over ‘saving the planet’, and I wish it was not so but it is and we have to face that reality) even if I express it in crappy way sometimes.

John Saint-Smith 1 year ago

Cooperation, and even altruism are as much a feature of human evolution as is selfish competitive behaviour, as evidenced by the fact that societies have persisted, and hermits and survivalists do not. Indeed, most ‘self-made’ survivalists are actually totally (but ungratefully) dependant on the technology and social support mechanisms generated and sustained over generations by the cooperative society they claim to reject.

Human history is replete with examples of cooperation triumphing over Lying Nasty Party behaviour as advocated by our present government and their spiritual leaders at the IPA.

Where would the Wall Street pirates ( the 1% whose greatest claim to fame is the GFC) be today if they weren’t able to rely on the collective bail-out assistance of the long-suffering but ultimately most powerful group, the ordinary cooperative muggins tax payers.

Imagine, if you can, a ‘society’ of heroes like the Reagans, Thatchers and Trumps, acting exclusively on the principle that there is ‘no such thing as society’. Total collapse within days of its hypothetical creation.

So, if human civilization persists, it has been because cooperation always trumps selfish capitalism in the long run. I am moderately confident that just as the denialist pro-coal anti-social anti-renewable terrorist faction has failed to deliver its promised bonanza built on individual self-interest, so the people will return as always to the core value of humanity – cooperation.

Ren Stimpy 1 year ago

Good in theory but we conducted a little survey just over a year ago in the US. A survey of 210 million people.

68 million people want to actively destroy ‘the planet’. 90 million people couldn’t give a flying flip about ‘the planet’. 66 million ‘might’ want to ‘save the planet’ now but, if push comes to shove, in all likelihood not.

Only 1.5 million people out of a total of 210 million people surveyed genuinely want to ‘save the planet’.

Thanks for that. I wondered what ‘survey’ you were talking about. You include the people who didn’t vote in the ‘not a flying flip’ group, I assume. You’d be dead wrong.

What you have identified is the self-evident fact that the American democracy is dead. Australia’s is on life support, because we are fined if we don’t cast a vote, and somehow that prompts about 90% of us to ‘do the right thing’. But who you vote for in elections isn’t necessarily who you’d fight for when the chips are down.

For starters, there are quite a few million adult citizens in the US who aren’t allowed to vote, courtesy of your bizarre habit of locking up more people than any other country, irrespective of their population, and disenfranchising them. Since the majority of these people are victims of drug addiction and other crimes of disappointment and distress, I think you assume too much to believe that these should be included among the ‘FF’ fraternity. They are distracted by their immediate circumstances, just like Trump’s followers. They’re angry with what has happened to them, but that doesn’t make them unable, or unwilling to unite and fight for survival. Those who ‘might’ work to save the planet, are, in large measure the same Democrats and independent voters who supported Obama, when he ‘said’ he wanted to save the planet. There’s a few who couldn’t stand ‘Crooked Hilary’and her presumption of the Presidency, and her apparent association with the 1%.

These are minor arguments. When push comes to shove, people behave very differently. When floods, fire and hurricanes threaten lives, people behave very differently. You’ve seen enough evidence of that recently. I walked the streets of New York in the month following the 9/11 attack, and strangers greeted one-another like old friends.

When we become aware of our real existential peril, you will see a different result. Even Donald will lend a hand.. joking!

But the vast majority of people are actually fundamentally decent and cooperative. And it’s not a theory.

Ren Stimpy 1 year ago

Well some might call me a troll (Kate I’m looking at you) but I do know how to bring out people’s true colours!

Ren Stimpy 1 year ago

Sorry John Saint-Smth, terrible thing to do for a crush.

Ren Stimpy 1 year ago

Forgive me if next time you post I reply Fuck Off John.

Ren Stimpy 1 year ago

OMG where is Kate?

John Saint-Smith 1 year ago

At last you’ve made a ‘relatively’ intelligent response. He can be taught, but he telegraphs his best shots…

Ren Stimpy 1 year ago

Yeh it was 75 million Flying Flips (not 90 million). My maths was slightly out because it was a Saturday. (Same with my manners, ha ha.) It doesn’t change anything though. The key number is still 1.5 million (who would work actively to ‘save the planet’) out of 210 million. The drug users and other cons or ex-cons who are locked up or were locked up are excluded from those 210 million, as is their system (and even if they were included do you think those people would rate ‘saving the planet’ above their own self-interest?)

So it’s simply down to this… 1.5 million people out of 210 million people want to actively ‘save the planet’. How long do you think it will take to convert the other 208.5 million out of 210 million to that point of view? A century? Or is that too optimistic?

Is there perhaps a better way, such as using our flexible playable capitalist system to effect the rapid changes we need?

Ren Stimpy 1 year ago

That’s not the true tragedy. Nowhere near it. The true tragedy is that we have these intelligent but hopeless sleepwalking people who think they can change the minds of this large inert majority of lazy self-interested fuckwits in time to save the planet, which clearly they can’t.

Farmer Dave 1 year ago

Sorry, Ren, I can’t agree with you on this. It has been said that our capitalist system can be reduced to its basics by two words: must grow. That’s the problem – endless growth on a finite planet is not possible; a system that falls apart if it does not always grow will eventually hit the limits to growth.

Ren Stimpy 1 year ago

I’m a strong believer in pricing the externalities (linked to cuts in other taxes) to modify consumer behaviour. Much more comprehensive recycling, war on waste. The world population will eventually stop growing. We have a vast suite of efficiency measures (such as LED lighting) that are currently just a very small step into total deployment. Companies are becoming more socially responsible led by activist shareholders, and even CEOs are slowly coming around to social responsibility being good for business. I think that eventually most people can have a good life on this planet under capitalism without endless growth.

My point though is that there is far too much antipathy and apathy towards ‘saving the planet’. If we frame this problem as ‘saving the planet’ we are bound to fail.

PaulC 1 year ago

In fact studies suggest that ethical investments (or impact investing) are no better that non-ethical ones in terms of returns. There are correlations with better performance from some studies but these do not find evidence of causation. Rather, there are other factors including investor behavioural elements which are thought by some to explain any difference in returns.

Add to that, that the notion of ethics is deeply personal. e.g. Would gas extraction be unethical if it was for a developing country currently suffering deforestation to satisfy energy needs? Different people have different values and no business is ever whiter than white because they are run by people who are never perfect and all think/feel differently.

None of that means that people shouldn’t opt for impact or ethical investing – rather just that it is but one force alongside regulation, consumer preference, and a range of other factors which influence corporate behaviour. So I don’t think this is about changing capitalism… it’s about appropriate governance and transparency after which people can exercise their power to decide.

I’d note though that we lack such basic transparency and decision making in respect of government (e.g. think about the poor transparency and governance of our energy markets) – so if you really want change, it would be good to get government right first. After all, that is setting the example and legislating boundaries for everything else.

Kate 1 year ago

Why are you asking if returns are any better? That seems a purely non-ethical consideration. Shouldn’t the question for a non-ethically minded investor be ‘are returns any worse’? Then, if the answer happens to be no – that you get roughly the same returns for either, then for the non-ethically minded investor the question is whether to deliberately snub ethically minded investments seemingly simply to be bloody-minded about it.

For those who _are_ ethically-minded in their investment choices, they’ll likely head for like minded investment options in the first instance.

That said – whole-heartedly agree on the need to get government working right in the first instance regardless.

Andy Saunders 1 year ago

Returns are only part of the answer – risk is the other part.

Radbug 1 year ago

I’ve always opined that the “peaceniks” in the Vietnam War Moratorium Movement were right for the less important reasons. The real reason they were right was that not spending all that printed money on the war would have enabled Nixon to keep the US dollar on the gold standard. Ironically, the “peaceniks” were actually the American Empire’s best friends!! Well, what with Samarco and Chesapeake Shale, the “greenies” were right, but not for the most compelling reason. By being smart-arses and disparaging environmental concerns, BHP has lost the best part of sixty billion dollars! The self important, eight figure salary CEO’s of these corporations choose the high risk option when they invest in ways that are not in harmony with the environment. For example, jettison pyrometallurgy and embrace (solar electrical) electrowinning. Pay for research bacteria that will gather to themselves the residual metal in tailings dumps. Strive to find ways to make money helping the environment. For example, there’s a abandoned silver mine near the Dumaresq River in Queensland, with a huge tailings dump that threatens to overflow and pollute the Darling catchment if it receives too much rain. The mining company that walked away from this outrage will be the last. Mine-site remediation charges will eat your lunch now. Experience shows, choose the pro-environmental option, the business risk is lower.

It doesn’t seem to matter that AGW has been shown to be a fraud, the Globalists keep on rolling the Juggernaut.

Kate 1 year ago

Hmmm. Should I take the bait and ask Tanya to provide evidence showing that ‘AGW has been shown to be a fraud’ … or should I just make a comment about not feeding the troll … I cannot decide which …

John Saint-Smith 1 year ago

History has already claimed the deniers. Their greatest prediction was that the world stopped warming in 1998. First they said it was cooling, and would soon plunge us into a new ice age, then “it hasn’t warmed” became “has warmed less than predicted”, and now, with 4 of the warmest years ever recorded notched up in successive years, we have only silence and ‘Trumped-up’ generalizations like that above.

The answer, in the original French, if you like, is available in Thomas Pickety’s ‘Capitalism in the 21st Century’.

It can, and will be tamed, and tuned to fit the real world, by prioritizing Ecology (balance, renewable resources, pollution elimination, recycling, biomimicry) and Ethics (social justice, equity) over classic ‘dumb’ Economics.

Pixilico 1 year ago

I wish I could share your optimism and certainty that Reason will finally prevail over mainstream economics. After all, it’s been attempted for so long with hardly any positive results, to put it mildly. Greed above all else is still the rule of the game and I just can’t see it going away from economic calculus.

Btw, mainstream economists are usually fond of saying that moral considerations such as ethics are outside the scope of the discipline. In other words, mainstream economists might even be ‘ethical’ in their private lives, but in order to rigourously treat economics as a scientific discipline they must forcibly leave it out.

John Saint-Smith 1 year ago

With respect to moral considerations by economists, remember Adam Smith’s second book about the moral implications of market economics. There is no rational reason why economists can’t include ecology and ethics in their analysis. When I first started studying science, it was common for academics to claim that scientists should not consider the ethics of their experiments. Dr Mengele actually believed he was doing good science on sub-human subjects.

After many years of pretending that humans are rational consumers, a new generation of behavioural economists are changing our understanding of human responses to risk.

Pixilico 1 year ago

No, there’s no impediment why ecology, morals and ethics shouldn’t be included in economic reasoning. But those economists who do it are considered ‘fringe economists’ (not to say, plain weirdos) by the ‘Dr. Mengeles’ of the mainstream who cater to the ‘market’ (no matter what their subjects might suffer as a result) and therefore, their influence remains scant, to say the least.

Godspeed in your quest for an economics discipline with ‘a human face’, anyway. We all need it. 😉

John Saint-Smith 1 year ago

On the basis of historical precedent, I’ll stick with the weirdos. Their record plots the path of human growth.

CrushAllDems 1 year ago

I think I’ll be keeping my money far, far away from the idiots at Blackrock…